Many parents face the decision during their working years to try to fund both retirement and college education. Some can adequately do both while others are forced to do the best they can with what money they can save.
Sometimes parents can get caught up in wanting to save as much as they can for their children’s college education and forgo the need to save for or save more for retirement.
When this situation presents itself, I have given my clients my airplane analogy. It goes something like this:
Have you ever flown on an airplane before? If you have you know that once you’re scrunched in and belted and the plane makes its way from the gate the flight attendants break radio silence and start with their routine flight instructions. After you’re taught where the exit rows are and how to use your seat as a floatation device they inevitably change the conversation to cabin pressure.
Should the aircraft experience a decrease in cabin pressure oxygen masks will fall from the overhead compartments. Grab the mask and fully extend the cord to allow the release of oxygen.
The next words are crucial to your survival.
Place the mask over your face and tighten the straps on the side. Once your mask is secured then attend to your child or help the person next to you.
Why would they say that? Because if you pass out at 35,000 feet you’re of no use to anyone.
A similar comparison can be made for those parents saving for both retirement and college. If the focus is solely or mostly on college savings, there may be little if any money accumulated for retirement. In addition, there are plenty of financial aid opportunities available for college. The options for financial aid in retirement are slim.
I’m not saying don’t save for your child’s education. It is very important and a priority for many parents. What I am saying is make sure your retirement savings are being added to as well. Otherwise the reward for all of that money saved for college may be a degree – and two future roommates for the graduate!
An IRA Owner's Manual or if you'd prefer the Kindle version (and let's face it, ALL the cool kids do!), you can find that at this Kindle version link.